Business, Freight News, Logistics

EU Commission plans root and branch customs reform

[ May 18, 2023   //   ]

The European Commission set out proposals on 17 May for what it said was the most ambitious and comprehensive reform of the EU Customs Union since its establishment in 1968.

The aim is to “massively simplify” customs processes especially those for trusted traders. Digital processes will cut cumbersome procedures and replace traditional declarations with a smarter, data-led approach to import supervision. At the same time, customs authorities will be given tools and resources to properly assess and stop imports which pose real risks.

The reforms are in response to a huge increase in trade volumes, especially in e-commerce, the fast-growing EU standards that must be checked at the border, and shifting geopolitical realities, as well as a greener, more digital era.

The reforms aim to simplify and rationalise customs reporting requirements for traders, for example by reducing the time needed to complete import processes and by providing a single EU interface and facilitating data re-use.

A new EU Customs Authority will oversee an EU Customs Data Hub which will act as the engine of the new system. Over time, the Data Hub will replace the existing customs IT infrastructure in EU Member States, saving up to €2 billion a year in operating costs, says the Commission. The new Authority will also help deliver risk management and customs checks.

In the reformed Customs Union, importers will be able to log all the information on their products and supply chains into a single online EU Customs Data Hub. Cutting-edge technology will compile the data provided by business and – through machine learning, artificial intelligence and human intervention – provide authorities with a complete overview of supply chains and the movement of goods.

Businesses will only need to interact with one portal when submitting their customs information and will only have to submit data once for multiple consignments. A new Trust & Check category of trader, a strengthening of the existing Authorised Economic Operators (AEO) programme, will be able to release their goods into circulation into the EU without any active customs intervention at all.

Under the proposals, the Data Hub will open for e-commerce consignments in 2028, followed (on a voluntary basis) by other importers in 2032. Trust & Check traders will also be able to clear all their imports with the customs authorities of the Member State in which they are based, no matter where the goods enter the EU. A review in 2035 will assess whether this can be extended to all traders when the Hub becomes mandatory from 2038.

All Member States will have access to real-time data and will be able to pool information to respond more effectively to risks.

Artificial intelligence will be used to analyse data and to predict problems before the goods have even started their journey to the EU, allowing customs authorities to focus their efforts and resources to stop unsafe or illegal and to uphold EU bans on certain goods that go against common EU values – for example those that fail to meet its standards on climate change, deforestation or use of forced labour. It will also help to ensure proper collection of duties and taxes.

Information and expertise will be pooled and assessed at EU level via the new EU Customs Authority acting on the data provided through the EU Customs Data Hub. The new regime will substantially improve cooperation between customs and market surveillance and law enforcement authorities at EU and national level, including information sharing via the Customs Data Hub.

Online platforms will ensure that goods sold online into the EU comply with all customs obligations. This is a major departure from the current customs system, which puts the responsibility on the individual consumer and carriers. Platforms will be responsible for ensuring that customs duties and VAT are paid at purchase, so consumers will no longer be hit with hidden charges or unexpected paperwork when parcels arrive. With online platforms as the official importers, EU consumers can be reassured that all duties have been paid and that their purchases are safe and in line with EU environmental, safety and ethical standards.

The reform abolishes the current threshold whereby goods valued at less than €150 are exempt from customs duty, which the Commission says is heavily exploited by fraudsters. Up to 65% of such parcels entering the EU are currently undervalued, to avoid customs duties on import.

The reform also simplifies customs duty calculation for the most common low-value goods bought from outside the EU, reducing the thousands of possible customs duty categories down to only four. This will make it much easier to calculate customs duties for small parcels, helping platforms and customs authorities alike to better manage the one billion e-commerce purchases entering the EU each year.

The legislative proposals will now be sent to the European Parliament and the Council of the European Union for agreement, and to the European Economic and Social Committee for consultation.